DEPUTY COMMISSIONER INCOME TAX, CIRCLE-2, Jaipur V. M/S H.K. IMPEX, Jaipur

ITA 1164/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2097 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 27-09-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Recovery proceedings; Period of limitation
• Section: 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1164/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2012-13 THE DCIT, CIRCLE-02, JAIPUR CUKE VS. M/S H. K. IMPEX, 2260, TAKIA YAKEEN SHAH, CHOUKDI TOPKHANA, HAJURI, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAFH5802K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. P.C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. RUNI PAL (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 19/03/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 28/04/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)- I, JAIPUR, DATED 30.07.2019 WHEREIN FOLLOWING GRO UNDS OF APPEAL HAVE BEEN TAKEN:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON MADE BY THE AO U/S 41(1) OF THE INCOME TAX ACT, 1961 WITHOUT TAKIN G COGNIZANCE OF THE FACT THAT THE ASSESSEE WITHOUT SPECIFYING ANY R EASON HAS NOT MADE PAYMENT TO TWO PARTIES NAMELY M/S SKY GEMS AND M/S AR GEMS AMOUNTING TO RS. 92,19,355/- AND RS. 21,61,250 RESP ECTIVELY DESPITE HAVING OBTAINED THE APPROVAL FROM RBI FOR ITS REMIT TANCE ON 04.08.2015. FURTHER THERE IS NO PURSUANCE FOR THE A PPLICATION AGAIN ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 2 FILED ON 19.08.2016 THEREBY ESTABLISHING THAT THESE LIABILITIES HAD CEASED TO EXIST DURING F.Y 2011-12? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 1,20,54,761/- MADE BY THE AO U/S 41(1) OF THE INCOM E TAX ACT, 1961 HOLDING THAT THE ASSESSEE HAS HIMSELF WRITTEN OFF S UCH LIABILITIES IN A SUBSEQUENT YEAR THAT IS F.Y 2016-17 WHEREAS THESE H AD CEASED TO EXIST DURING F.Y 2011-12 RELEVANT TO A.Y 2012-13 IT SELF AS RIGHTLY OBSERVED BY AO? 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN BUSINESS OF IMPORT, EXPORT, TRADING AND MANUFACTURING OF PRECIOUS, SEMI PRECIOUS FINISHED AND ROUGH STONES. IT FILED ITS RETURN OF INCOME ON 20.09.2012 DECLARING INCOME OF RS. 1,62,9 30/-. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN SUNDRY CREDITORS OF RS. 5,97,08,992/- AS ON 31.03.2012. THE AO OBSERVED THA T OUT OF THE TOTAL OUTSTANDING CREDITORS OF RS. 5,97,08,992/-, ASSESSE E HAS MADE PAYMENT/WRITTEN BACK THE CREDITOR IN THE SUBSEQUENT YEARS TO THE EXTENT OF RS. 1,62,89,178/-. ACCORDINGLY, HE TREATED THE BALA NCE AMOUNT OF RS. 4,34,19,814/- AS CESSATION OF THE LIABILITY U/S 41( 1) OF THE ACT AND CORRESPONDING ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A) AND SUBMITTED THAT CREDITORS OF RS. 4,34, 19,814/- CAN BE DIVIDED INTO FOLLOWING THREE CATEGORIES. (A) PARTIES IN RESPECT OF WHICH ASSESSEE HAS SUBSEQ UENTLY OBTAINED APPROVAL FROM RBI AND MADE PAYMENT RS. 1,87,24,339/ -. ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 3 (B) PARTIES IN RESPECT OF WHICH OUTSTANDING RELATES TO THE PERIOD LESS THAN 3 YEARS INCLUDING 2 PARTIES IN RESPECT OF WHICH PERMI SSION FOR PAYMENT HAS ALSO BEEN OBTAINED FROM RBI - RS. 1,26,40,714/-. (C) PARTIES FOR WHICH PAYMENT ARE OUTSTANDING DUE T O DISPUTE AND THE SAME IS WRITTEN BACK IN ACCOUNTS IN APRIL 2016- RS. 1,20,51,761/- 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE AND THE REMAND REPORT OF THE AO DELETED THE ADDITION MADE B Y THE AO BY GIVING FOLLOWING FINDINGS:- (A) ADDITION U/S 41(1) OF THE ACT CANNOT BE MADE W HEN THE EVIDENCE BROUGHT ON RECORD INDICATE THAT THE ASSESSEE HAS CO NTINUED PAYMENT TO THE CONCERNED PARTIES SUBSEQUENTLY TO DISCHARGE THE LIA BILITY. (B) THE ASSESSEE HAS HIMSELF WRITTEN BACK THE CREDI TORS IN A.Y 2017-18 WHICH INDICATE THAT THE ASSESSEE WAS RECOGNIZING SU CH LIABILITY TILL YEAR 2017- 2018. THE ADDITION OF THE SAME AMOUNT IN THE CURREN T YEAR WILL AMOUNT TO DOUBLE ADDITION. (C) THE LIABILITY IS STILL BRING RECOGNIZED IN THE BOOKS OF ACCOUNTS AND IN THE ABSENCE OF SPECIFIC FINDING BY THE AO THAT THE SAID AMOUNT HAS BEEN SPECIFICALLY WRITTEN OFF IN BOOKS OF ACCOUNTS, IT D OES NOT AMOUNT TO REMISSION/CESSATION OF LIABILITY. THE REASON THAT C REDITORS ARE OUTSTANDING FOR LONG PERIOD CANNOT BE BASIS FOR ADDITION U/S 41(1) OF THE ACT. 5. AGAINST THE ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US ON THE GROUND THAT ASSESSEE WITHOUT SPECIFYING ANY REA SON HAS NOT MADE PAYMENT TO TWO PARTIES NAMELY M/S SKY GEMS LTD. AND M/S A.R GEMS ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 4 AMOUNTING TO RS. 92,19,355/- AND RS. 21,61,250/- RE SPECTIVELY DESPITE HAVING OBTAINED THE APPROVAL FROM RBI FOR ITS REMIT TANCE ON 04.08.2015/19.08.2016 AND SECONDLY, THE LIABILITY O F RS. 1,20,46,936/- WHICH HAS BEEN WRITTEN OFF BY THE ASSESSEE IN SUBSEQUENT YEAR I.E. F.Y 2016-17 HAD CEASED TO EXISTS DURING F.Y 2011-12 ITSELF. 6. DURING THE COURSE OF HEARING, THE LD DR SUBMITT ED THAT THESE ARE LONG OUTSTANDING CREDITORS AND THE ASSESSEE HAS NOT MADE ANY PAYMENT TO M/S SKY GEMS AND M/S AR GEMS INSPITE OF GETTING THE APP ROVAL OF THE RBI FOR REMITTING THE MONEY TO THESE PARTIES WHICH CLEARLY SHOW THAT THE LIABILITY TOWARDS THESE PARTIES HAVE CEASED TO EXIST AND THE AO WAS RIGHT IN INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT AND WHIC H HAS WRONGLY BEEN DELETED BY THE LD CIT(A). FURTHER, IT WAS SUBMITTE D THAT THE LD CIT(A) HAS WRONGLY DELETED THE ADDITION OF RS 1,20,46,936/- ME RELY FOR THE REASON THAT THE ASSESSEE HAS SUBSEQUENTLY WRITTEN OFF SUCH LIAB ILITIES IN FINANCIAL YEAR 2016-17 WHEN THE FACT OF THE CASE IS THAT THE LIABI LITIES IN RESPECT OF THESE CREDITORS HAVE CEASED TO EXIST DURING THE FINANCIAL YEAR 2011-12 ITSELF. HE ACCORDINGLY SUPPORTED THE ORDER OF THE ASSESSING OF FICER. 7. PER CONTRA, THE LD. AR SUPPORTED THE FINDINGS OF THE LD CIT(A) AND DRAWN OUR REFERENCE TO THE PROVISIONS OF SECTION 41 (1)(A) WHICH READ AS UNDER:- (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE I N THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDI TURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REF ERRED TO AS THE FIRST- MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVI OUS YEAR,- (A) THE FIRST MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 5 OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAI NED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DE EMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY AND CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHE THER THE BUSINESS OF PROFESSION IN RESPECT OF THE ALLOWANCE OR DEDUCT ION HAS BEEN IS IN EXISTENCE IN THAT YEAR OR NOT; OR. EXPLANATION 1- FOR THE PURPOSES OF THIS SUB-SECTION , THE EXPRESSION LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSION THEREOF SH ALL INCLUDE THE REMISSION OR CESSION OF ANY LIABILITY BY A UNILATER AL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THE SUB-SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. 8. IT WAS SUBMITTED THAT FROM THE PLAIN READING OF THE SECTION, IT CAN BE NOTED THAT SECTION 41(1) WOULD BE ATTRACTED ONLY WH EN THERE IS A REMISSION OR CESSATION OF A TRADING LIABILITY. EXPLANATION 1 TO THIS SECTION FURTHER CLARIFIES THAT ANY UNILATERAL ACT OF WRITING OFF A LIABILITY IN THE ACCOUNTS WOULD ALSO BE CONSIDERED AS REMISSION OR CESSATION OF THE LIABILI TY. IT WAS SUBMITTED THAT ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF PRECIOU S AND SEMI PRECIOUS STONES. THE ASSESSEE HAS NOT WRITTEN BACK ANY OF TH ESE CREDITORS NOR AO HAS BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT THE LI ABILITY HAS CEASED TO EXIST. SECTION 41(1) CANNOT BE INVOKED WHERE LIABILITY TO PAY TO THE CREDITOR IS CONTINUED TO BE SHOWN IN THE BOOKS OF ACCOUNTS AND THE CREDITOR HAS NOT WRITTEN OFF THE SAME. IN THE TRADE OF GEMS AND JEWE LLERY IT IS A NORMAL PHENOMENON THAT THE AMOUNT REMAINS OUTSTANDING FOR MORE THAN THREE TO FIVE YEARS. TO BRING AN AMOUNT TO TAX U/S 41(1), TH E AO HAS TO PROVE THE SAME BY POSITIVE EVIDENCE THAT LIABILITY HAS CEASED TO EXIST. THIS HAS NOT BEEN ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 6 DONE. THE AO HAS PICKED UP ALL THE CREDITORS WHO AR E OUTSTANDING AS ON 31 ST MARCH, 2012 AND NOT PAID/WRITTEN BACK TILL THE DATE OF ASSESSMENT. THIS IS NOT AS PER LAW AS THE ASSESSEE HAS NOT WRITTEN BACK ANY OF THESE CREDITORS NOR AO HAS BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT THE LIABILITY HAS CEASED TO EXIST. THEREFORE, ADDITION MADE U/S 41(1) IS NOT AS PER LAW. 9. IT WAS FURTHER SUBMITTED THAT IN ASSESSMENT PROC EEDINGS, THE ASSESSEE HAS FILED COPY OF ACCOUNT OF ALL PARTIES. ALL THE C REDITORS ARE AGAINST PURCHASES. SECTION 41(1) CANNOT BE INVOKED ON THE G ROUND THAT ASSESSEE HAS NOT FURNISHED EVIDENCE TO PROVE THAT IT WILL MAKE P AYMENT TO THE CREDITORS OR THE EVIDENCE ABOUT THE DISPUTE WITH THE CREDITORS P ARTICULARLY WHEN LIABILITY TO PAY THE CREDITORS IS CONTINUED TO BE REFLECTED IN T HE BOOKS OF ACCOUNTS AND THE CREDITORS HAS NOT BEEN WRITTEN BACK. THE LD. CI T(A) IN THESE FACTS HAS CALLED A REMAND REPORT WHERE ADDITION OF RS. 1,87,2 4,329/- WHERE PAYMENT IS SUBSEQUENTLY MADE IS DELETED AGAINST WHICH DEPARTME NT IS NOT IN APPEAL. THE LD. CIT(A) ALSO DELETED THE ADDITION OF RS. 1,20,54 ,761/- WHICH HAS BEEN SUBSEQUENTLY WRITTEN BACK BY THE ASSESSEE BUT DEPAR TMENT HAS CHALLENGED THE SAME IN GROUND NO. 2 OF THE APPEAL. THE LD. CIT (A) HAS ALSO DELETED THE ADDITION OF THE CREDITORS OF RS. 1,26,40,714/- IN R ESPECT OF FIVE CREDITORS WHICH WAS OUTSTANDING FOR THE PERIOD LESS THAN 3 YE ARS OUT OF WHICH DEPARTMENT HAS CHALLENGED THE DELETION IN RESPECT O F TWO CREDITORS, I.E., M/S SKY GEMS LTD. AND M/S AR GEMS AGGREGATING TO RS. 1, 13,80,605/- IN GROUND NO. 1 OF THE APPEAL. 10. IT WAS FURTHER SUBMITTED THAT IN RESPECT OF THE SE CREDITORS WHICH ARE UNDER CHALLENGE BY THE DEPARTMENT, FOLLOWING FACTS ARE RELEVANT:- A. M/S SKY GEMS LTD. RS. 92,19,355/- ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 7 FROM THE COPY OF ACCOUNT FROM F.Y 2008-09 TO 2011-1 2 WHICH IS PLACED ON RECORD, IT CAN BE NOTED THAT ASSESSEE MADE REGULAR PURCHASES FROM THIS PARTY AND ALSO REGULARLY MADE THE PAYMENT. HOWEVER, SOME OF THE BILLS WHICH RELATE TO THE PERIOD 2009 TO 2011 REMAINED OUTSTAND ING. BEFORE LD. CIT(A) ASSESSEE FILED CERTIFICATE OF IMPORT AND ALSO THE C ORRESPONDENCE WITH PARTY DATED 14.03.2016 REGARDING PAYMENT OF OUTSTANDING. THE ASSESSEE ALSO GOT THE PERMISSION FROM RBI ON 4.08.2015 FOR MAKING THE PAYMENT. HOWEVER, DUE TO UNAVOIDABLE CIRCUMSTANCES, PAYMENT COULD NOT BE MADE. THE ASSESSEE AGAIN FILED AN APPLICATION TO ITS BANKER O N 19.08.2016 FOR REVALIDATION OF THE BILLS SO THAT REMITTANCE CAN BE MADE BUT THE SAME IS STILL PENDING AND THEREFORE, REMITTANCE COULD NOT BE MADE . THIS PROVES THAT THE LIABILITY TO PAY THE CREDITORS STILL EXISTS. IN THE REMAND PROCEEDINGS, AO HAS NOT MADE ANY ADVERSE COMMENTS AND THEREFORE, LD. CI T(A) HAS RIGHTLY DELETED THE ADDITION BY REFERRING TO VARIOUS DECISI ONS AT PARA (XVIII) TO (XX) AT PAGES 36 TO 38 OF HIS ORDER. B M/S A.R GEMS- RS. 21,61,520/- FROM THE COPY OF ACCOUNT WHICH IS PLACED ON RECORD, IT CAN BE NOTED THAT THIS AMOUNT IS OUTSTANDING IN RESPECT OF PURCHASES MADE FOR THE YEAR 2011- 2012 ITSELF. BEFORE LD. CIT(A), THE ASSESSEE FILED LETTE R DATED 21.03.2016 OF THE PARTY REGARDING PAYMENT OF OUTSTANDING ALONG WITH T HE COPY INVOICE AND CERTIFICATE OF IMPORT. THE ASSESSEE ALSO GOT THE PE RMISSION FOR RBI ON 4.08.2015 FOR MAKING THE PAYMENT. HOWEVER, DUE TO U NAVOIDABLE CIRCUMSTANCES PAYMENT COULD NOT BE MADE. THE ASSESS EE AGAIN FILED AN APPLICATION TO ITS BANKER ON 29.08.2016 FOR REVALID ATION OF THE BILLS SO THAT REMITTANCE CAN BE MADE BUT THE SAME IS STILL PENDIN G AND THEREFORE, REMITTANCE COULD NOT BE MADE. THIS PROVES THAT THE LIABILITY TO PAY THE CREDITORS STILL EXISTS. IN THE REMAND PROCEEDINGS, AO HAS NOT MADE ANY ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 8 ADVERSE COMMENTS AND THEREFORE, LD. CIT(A) HAS RIGH TLY DELETED THE ADDITION BY REFERRING TO VARIOUS DECISIONS AT PARA (XVIII) T O (XX) AT PG 36 TO 38 OF HIS ORDER. (C) PARTIES FOR WHICH PAYMENT ARE OUTSTANDING DUE T O DISPUTE AND THE SAME IS WRITTEN BACK IN ACCOUNT IN APRIL 2016 - RS. 1,20,54,761/-. IT WAS SUBMITTED THAT IT RELATES TO THE AMOUNT PAYA BLE TO THE FOLLOWING PARTIES:- S.NO. NAME OF THE PARTY AMOUNT (IN RS.) 1 SOUTHSTREAM ENTERPRISES 21,86,502/- 2 BITS TRADING CO. LTD 2,98,717/- 3 GEMS HOUSE (K) LTD. 8,34,528/- 4 RVP LTD. 14,20,934/- 5 GLITZ (KENYA) LTD. 8,03,343/- 6 JAGODA GEMS LTD. 3,51,889/- 7 KARIBA AMETHYST MKTG. LTD. 6,12,410/- 8 PROMINENT GEMS & ROUGH INC. 4,87,082/- 9 MBELE INVESTMENT LTD. 8,09,866/- 10 GEMS MARKETING SERVICES 22,31,124/- 11 WILDLIFE RANCH & TRADING CO. LTD. 20,18,366/- TOTAL 1,20,54,761/- IT WAS SUBMITTED THAT IN ASSESSMENT PROCEEDING, THE ASSESSEE FILED THE COMPLETE DETAILS OF THESE PARTIES AND CONFIRMATION IN SOME OF THE CASES. THESE AMOUNTS ARE STILL PAYABLE BUT THE SAME WERE W RITTEN BACK BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS FOR F.Y 2016-17 A ND ACCORDINGLY, OFFERED FOR TAX IN A.Y 2017-18. THUS, WHEN THESE CREDITORS HAVE BEEN WRITTEN BACK AND OFFERED FOR TAX IN A.Y 2017-18, IN VIEW OF EXPL ANATION 1 TO SECTION 41(1), ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 9 THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION AS PER PARA (XIII) & (XIV) OF HIS ORDER. 11. FURTHER, RELIANCE WAS PLACED ON THE FOLLOWING C ASES, APART FROM THE DECISIONS ALREADY REFERRED IN THE ORDER OF LD. CIT( A):- PCIT VS. PUKHRAJ S. JAIN ITA NO. 1288 OF 2016 ORDER DT. 04.01.2019 (BOM) IT IS WELL SETTLED THROUGH SERIES OF JUDGMENTS THAT MERELY BECAUSE A DEBT HAS NOT BEEN REPAID FOR OVER THREE YEARS, WOULD NOT AUT OMATICALLY IMPLY CESSATION OF LIABILITY. EXHAUSTION OF PERIOD OF LIMITATION MA Y PREVENT FILING OF RECOVERY PROCEEDINGS IN A COURT OF LAW, NEVERTHELESS IT CANN OT BE STATED BY ITSELF THAT THE LIABILITY TO REPAY THE AMOUNT HAD CEASED. SUCH LIABILITY CANNOT BE TERMED AS BOGUS. PCIT VS. NEW WORLD SYNTHETICS LTD. (2018) 258 TAXMA N 189 (DEL) NON-PAYMENT OF OUTSTANDING LIABILITY WHICH IS ADMIT TED AND ACKNOWLEDGED AS DUE AND PAYABLE BY AN ASSESSEE DOES NOT INDICATE RE MISSION OR CESSION OF LIABILITY. DELAY OR NON-PAYMENT, EVEN WHEN AO IS OF THE OPINION THAT LIKELIHOOD OF PAYMENT WAS REMOTE AS BUSINESS HAS ST OPPED, WOULD BY ITSELF NOT DENOTE AND MEAN CESSATION OR REMISSION OF LIABI LITY. BABULAL PRODUCTS (P.) LTD. VS. ACIT (2017) 167 ITD 402 (AHD.) (TRIB.) IN RETURN OF INCOME, ASSESSEE HAS SHOWN LIABILITIES UNDER HEAD SUNDRY CREDITORS FOR GOODS, SUNDRY CREDITORS FOR EXPENSES, ADVANCES FROM CUSTOMERS AND OTHER LIABILITIES. AO FORMED AN OPINION THAT TH ERE WAS NO MANUFACTURING ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 10 ACTIVITY IN BUSINESS SINCE 13.03.2005, THEREFORE, T HIS LIABILITY WAS TO BE ASSUMED AS CEASED. ACCORDINGLY, HE MADE AN ADDITION . IT WAS HELD THAT AO HAD NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT LIABILITY HAD CEASED. ASSESSEE HAD NOT WRITTEN OFF LIABILITY IN ACCOUNTS. ADDITION U/S 41(1) COULD NOT BE MADE UNLESS LIABILITY IN ACCOUNTS HAD BEEN WRITT EN OFF. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN RESPECT OF TRANSACTION WI TH M/S SKY GEMS, THE LD CIT(A) HAS RETURNED A FINDING THAT THE ASSESSEE HAD MADE THE PURCHASE IN PRECEDING THREE YEARS AND HAS ALSO OBTAINED THE PER MISSION FROM RBI FOR REMITTING THE MONEY. IN RESPECT OF M/S AR GEMS, THE LD CIT(A) HAS RETURNED A FINDING THAT THE PURCHASES WERE MADE DURING THE F INANCIAL YEAR 2011-12 ITSELF AND APPLICATION WAS FILED SEEKING PERMISSION OF RBI TO REMIT THE MONEY AND CONFIRMATION OF THE PARTY WAS ALSO FILED DURING THE ASSESSMENT PROCEEDINGS. IT WAS HELD BY THE LD CIT(A) THAT AS THE LIABILITIES ARE STILL BEING RECOGNIZED IN THE BOOKS OF ACCOUNTS, IT DOESNT AMO UNT TO REMISSION/CESSATION OF LIABILITY AND RELIANCE WAS P LACED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS NARE NDER MOHAN MATHUR 97 DTR 428 (RAJ). THE SAID FINDINGS OF THE LD CIT(A) REMAIN UNCONTROVERTED BEFORE US. WE FIND THAT THE LIABILITY CONTINUE TO EXIST AS ON THE CLOSE OF THE FINANCIAL YEAR 2011-12 AS EVIDENCE BY THE FACT THAT THE PERMISSION TO REMIT THE MONEY HAS BEEN SOUGHT AND GRANTED BY THE RBI ON 4/8/2015 AND THEREAFTER, THE ASSESSEE HAD AGAIN APPLIED FOR PERM ISSION TO REMIT ON 19/8/2016. THE FACT THAT THE PAYMENT HAS STILL NOT BEEN MADE CANNOT BE SOLE REASON AS REFLECTIVE OF REMISSION OR CESSATION OF THE SAID LIABILITY AS THERE COULD BE OTHER FINANCIAL CONSTRAINTS FOR NOT MAKING THE PAYMENT IN TIME. THE FACT REMAINS THAT THE LIABILITY CONTINUE TO EXIST A ND REMAIN PAYABLE AND THE ASSESSEE CONTINUE TO REFLECT THE SAME AS PAYABLE IN ITS BOOKS OF ACCOUNTS AS ON CLOSE OF THE FINANCIAL YEAR 2011-12 AND IN VIEW OF THE SAME, THERE IS NO ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 11 BASIS FOR MAKING THE ADDITION U/S 41(1) AND THE FIN DINGS OF THE LD CIT(A) ARE HEREBY CONFIRMED. 13. REGARDING AMOUNT OF RS 1,20,54,761/-, THE LD CI T(A) HAS RETURNED A FINDING BASED ON PERUSAL OF PROFIT AND LOSS ACCOUNT AND RETURN OF INCOME FOR A.Y 2017-18, THAT THE ASSESSEE HAS WRITTEN BACK THE CREDITORS AMOUNTING TO RS 1,20,46,936/- IN A.Y 2017-18 WHICH INDICATES THA T THE ASSESSEE WAS RECOGNIZING SUCH LIABILITIES TILL A.Y 2017-18. THE REVENUE HAS NOT BROUGHT ANY EVIDENCE ON RECORD WHICH SUGGESTS THAT LIABILITY IN RESPECT OF THESE CREDITORS HAVE CEASED TO EXIST DURING THE FINANCIAL YEAR RELE VANT TO IMPUGNED ASSESSMENT YEAR 2012-13. THEREFORE, WHERE LIABILIT IES CONTINUE TO EXIST AND REFLECTED IN THE ASSESSEES BOOKS OF ACCOUNTS, THER E IS NO BASIS TO BRING THE SAME TO TAX U/S 41(1) OF THE ACT. FURTHER, IN THE A.Y 2017-18, WHERE SUCH LIABILITIES HAVE BEEN WRITTEN BACK IN THE BOOKS OF ACCOUNTS, THE SAME HAVE ALREADY BEEN OFFERED TO TAX BY THE ASSESSEE IN HIS RETURN OF INCOME. THEREFORE, WE AFFIRM THE FOLLOWING FINDINGS OF THE LD CIT(A) WHICH READS AS UNDER: (XIII) NEXT, THE DISALLOWANCE OF CREDIT ENTRIES FR OM THE PARTIES APPEARING IN TABLE-2 IS EXAMINED. WHERE THE APPELLA NT HAS HIMSELF WRITTEN OFF THE OUTSTANDING LIABILITIES IN ITS BOOK S OF ACCOUNTS IN APRIL, 2016 AMOUNTING TO RS. 1,20,54,761/- IN THE REMAND P ROCEEDING ON THIS ISSUE, THE AO COMMENTED THAT WRITING OFF THE TRADIN G LIABILITY IN THE YEAR 2016 AFTER LAPSE OF 10 YEARS IS NOT SATISFACTO RY. THE AO ALSO CONDUCTED ENQUIRIES THROUGH FT & TR DIVISION OF THE DEPARTMENT AND FORWARDED THE REPORT RECEIVED TO THIS OFFICE. THE T RANSACTION RELATED TO M/S RVP LTD. AND M/S PROMINENT GEMS & ROUGH INC. CO ULD NOT BE VERIFIED BY THE CONCERNED AUTHORITIES. ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 12 (XIV) THE DETAILS FILED BY THE APPELLANT IS EXAMINE D. THE APPELLANT HAS SUBMITTED THE TAX AUDIT REPORT FOR AY 2017-18, WHER EIN IN THE PROFIT AND LOSS ACCOUNT, OTHER INCOME AMOUNTING TO RS. 1,2 0,46,936/- HAS BEEN SHOWN. THE RETURN OF INCOME WAS FILED ON 30.10 .2017 DECLARING TOTAL INCOME AT RS. 1,39,40,980/-. THUS, THE APPELL ANT HAS HIMSELF WRITTEN BACK THE CREDITORS AMOUNTING TO RS. 1,20,46 ,936/- IN A.Y 2017- 18 WHICH INDICATES THAT THE APPELLANT WAS RECOGNIZI NG SUCH LIABILITIES TILL A.Y 2017-18. THE ADDITION OF THE SAME AMOUNT IN THE CURRENT YEAR WILL AMOUNT TO DOUBLE ADDITION. IT IS ALSO SEEN THAT THE WRITING BACK OF SUCH LIABILITIES IN AY 2017-18 HAS BEEN SEPARATELY SHOWN BY THE APPELLANT IN PROFIT AND LOSS ACCOUNT AND OFFERED FOR TAXATION. C ONSIDERING THE ABOVE FACTS, THERE IS NO JUSTIFICATION OF MAKING ADDITION ON ACCOUNT OF OUTSTANDING TRADING LIABILITIES APPEARING IN TABLE- 2 AMOUNTING TO RS. 1,20,54,761/-. AS PER SUBMISSION, THE WRITING OFF H AS BEEN CLAIMED AT RS. 1,20,54,761/-, HOWEVER, IN THE RETURN OF INCOME FOR A.Y 2017-18 ONLY AMOUNT OF RS. 1,20,46,936/- IS ADDED. THE AO I S DIRECTED TO EXAMINE THE ABOVE DIFFERENCE AND GRANT THE RELIEF A CCORDINGLY. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 28/04/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 28/04/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- DCIT, CIRCLE-02, JAIPUR ITA NO.1164/JP/2019 DCIT, JAIPUR VS. M/S H. K. IMPEX, JAIPUR 13 2. IZR;FKHZ@ THE RESPONDENT- M/S H. K. IMPEX, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1164/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR